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Wednesday, October 15, 2008

Gazpromā€™s eyes on Alaska

//For gas production
10-14-2008 - RBC News - Gazprom’s appetite for Alaska is growing. In addition to two Alaskan pipeline projects under discussion, the Russian gas giant wants to build a LNG plant in the region, expressing confidence that its experience of working in the Far North would be useful in the United States’ most northerly state. Experts say Gazprom could take part in Alaskan projects, though they would not be very lucrative. Gazprom officials met Alaskan officials and ConocoPhillips Chief Executive Jim Mulva on Tuesday, the gas group said. The talks centered not on Alaska’s gas pipeline Denali, which had been discussed earlier, but on other broad-based business opportunities, Bloomberg reported, citing a ConocoPhillips spokesman. Instead, Gazprom executives expressed “general interest”' in Alaska, a representative of the US Department of Natural Resources was quoted as saying. Gazprom officials also held a seminar during their visit to Alaska, demonstrating Gazprom’s vast experience in hydrocarbon production, construction and maintenance of gas pipelines, environmental care and solving social problems in the Far North. The company hopes that its experience will be used for similar projects in Alaska. In addition to two pipeline projects under discussion - Denali to pump Alaskan gas to the continental US and a rival project to transport Alaskan gas to Canada – it is also necessary to consider the construction of LNG facilities in the region, Gazprom experts maintain. Gazprom CEO Alexei Miller said at the St. Petersburg Economic Forum in June that Gazprom approached ConocoPhillips and BP on joining their Denali pipeline project from Alaska to Chicago. At that time, Gazprom also expressed interest in a rival project backed by TransCanada to transport Alaskan natural gas to Alberta in Canada. Dmitry Lyutyagin, an analyst at Veles Capital, says Gazprom may produce gas in Alaska together with BP and ConocoPhillips. The region’s gas reserves, estimated at 35 trillion cubic meters, are of little use so far due to a lack of gas pipelines. The first major gas project is North Slope, and Gazprom may very well try and take part. But the Russian gas giant will not get controlling interests in North American projects; most probably, it will get some gas and try to sell it in the United States. If Gazprom does get a foothold in the new market, Lyutyagin believes, it will undoubtedly become a transnational corporation. Another factor pushing the company towards projects in Alaska involves Gazprom’s unique experience: American companies may need advice on how to build long gas pipelines in extremely low temperatures and permafrost, says Nikolai Isain, an analyst at the Institute for Natural Monopoly Problems. At the same time, he thinks that Gazprom’s participation will not go beyond technical support, not rising to full-fledged partnership. There should be no serious political obstacles for Gazprom’s bid, given the small stake it could take in North American projects, Isain noted. It is only in Eurasian and Latin American markets that Gazprom stands in the way of US companies and Washington’s political plans, he added. ­ And Mikhail Korchemkin, General Director of East European Gas Analysis, thinks that Gazprom should not go to Alaska at all. The gas monopoly does not have excess cash to share the risks of American producers. Perhaps more importantly, this region does not even offer fruitful profits.

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